Federal Government Gives Boost to Unemployment Compensation
As part of its efforts to reduce the economic impact of the coronavirus (COVID-19) pandemic, the federal government has expanded unemployment benefits in several ways through two recently enacted statutes:
First, the Families First Coronavirus Response Act (enacted March 18, 2020) provided, among other things, an initial $1 billion in funds for state unemployment programs, and it ordered implementation of expedited processing of unemployment compensation claims.
Second, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) (enacted March 27, 2020) provided about $250 billion to expand unemployment compensation benefits. Specifically, the CARES Act:
- Provides for “Federal Pandemic Unemployment Compensation” in the amount of $600 weekly, in addition to regular state unemployment benefits;
- Extends the period of state unemployment benefits (typically limited to 26 weeks) by an additional 13 weeks; and
- Expands eligibility for those who normally are not eligible for unemployment benefits, such as self-employed individuals, independent contractors, those with limited work histories, and those unable to work due to certain COVID-19 related reasons.
Weekly Benefit Increase
Under the usual state unemployment compensation program, an applicant will receive a “Weekly Benefit Amount” (WBA) that is calculated by a formula that considers the individual’s compensation earnings over the past year. Each state uses its own formula, and the “maximum WBA” will vary from state to state. For example, in Georgia, the maximum WBA is $365.
Section 2104 of the new CARES Act (titled “Federal Pandemic Unemployment Compensation” or “FPUC”) authorizes an “Emergency Increase in Unemployment Compensation,” which will provide a supplemental $600.00 payment for each week of unemployment compensation through July 31, 2020. This amount will be added, each week, to an individual’s current, state-determined WBA. When the federal benefit is exhausted (July 31, 2020), the individual will revert back to his or her regular state-determined WBA.
Notably, the CARES Act does not require an applicant for unemployment benefits to have been forced into unemployment as a result of a COVID-19 circumstance. The Act only requires that, during the program period (now through July 31, 2020), the applicant qualifies under the applicable state rules. If the applicant qualifies for unemployment compensation, the $600 automatically will be added to each week’s WBA. If an employee was already (after January 27, 2020) on unemployment compensation prior to the COVID-19 situation, he or she will be eligible now to receive the additional $600 per month.
On April 4, the U.S. Department of Labor (DOL) issued Unemployment Insurance Program Letter (UIPL) 15-20, which provides detailed guidance for states on the administration of FPUC. The letter identifies the types of unemployment benefits an individual must qualify for under state rules in order to qualify for the weekly FPUC $600 benefit; the overall time schedule for the program; and other details about how the FPUC program should be administered. A copy is available here.
Temporary Federal Funding of First Week of UC Benefits; No Waiting Period
In most states, there is a one-week waiting period after an individual submits an application for unemployment compensation benefits. Thus, the first week of unemployment is typically unpaid.
Section 2105 of the CARES Act provides that the U.S. Treasury will fully reimburse states that eliminate the one-week waiting period and pay unemployment compensation to applicants for their first week of unemployment. All costs associated with this benefit are covered through December 31, 2020. Most states already have adopted this change.
Additional 13 Weeks of Unemployment Compensation
Section 2107 of the CARES Act (“Pandemic Emergency Unemployment Compensation” or “PEUC”), provides federal funding for an additional 13 weeks of unemployment compensation, through December 31, 2020, to individuals who have exhausted all rights to regular unemployment compensation under applicable state law for the 2020 benefit year. Thus, in a state where an applicant already is eligible for up to 26 weeks, he or she now may qualify for up to 39 weeks of unemployment compensation. During this period, the individual will continue to receive the usual state-determined WBA, plus (through July 31, 2020) the weekly $600.00 FPUC supplement.
Short-Time Compensation Payments (in States with Programs)
Section 2108 of the CARES Act provides federal funding for established “short-time compensation” (“STC”) or “workshare programs,” whereby an employer may reduce an employee’s hours instead of laying off the employee, and the employee will receive a pro-rated unemployment benefit. The Act provides that the U.S. Treasury will reimburse states for 100% of the costs incurred in providing this benefit through December 31, 2020.
An STC or workshare program allows an individual whose work hours have been reduced to collect a portion of unemployment compensation on top of his or her regular pay. These programs look at the number of hours worked (as opposed to total earnings) and can provide individuals with a pro rata share of weekly benefits (WBA) based on the reduction in weekly hours of work. The goal is to encourage an employer to avoid layoffs by reducing the number of regularly scheduled hours of work for all, or a group of, individuals during a business slowdown.
If a state does not already have a program, but implements one, it will receive 50% of the above funding. The employer will be responsible to fund the remaining cost. If, however, a participating state enacts an STC or workshare program that complies with Section 13-3306(v) of the Internal Revenue Code, then the employer will receive 100% reimbursement.
Increased Access to Unemployment Compensation
Section 2102 of the CARES Act creates the temporary “Pandemic Unemployment Assistance Program,” (“PUA”) (effective Jan. 27, 2020 through Dec. 31, 2020), which will grant unemployment compensation coverage to many individuals who would not otherwise be eligible for such benefits (e.g., self-employed persons, independent contractors, gig workers, part-time employment seekers, those who lack sufficient work history, and those who have exhausted their unemployment benefits under existing programs). These individuals will need to show that they are unemployed, partially unemployed, or unable to work because of one of several reasons enumerated in the CARES Act.
On April 5, the U.S. Department of Labor published Unemployment Insurance Program Letter (UIPL) 16-20, which provides additional guidance to the states on how to implement the Pandemic Unemployment Assistance (PUA) program. A copy is available here.
For more information about the federal legislation regarding new unemployment benefits and rules, or about any of the new developments in employment-related laws as a result of the COVID-19 crisis, please refer to the HGRS LLP Coronavirus (COVID-19) Resource Center, at www.hgrslaw.com, or contact our firm at (404) 442-8776.